Real Estate Terms

Real Estate terms can be confusing for everyone from the first-time homebuyer to a seasoned veteran. Commercial Real Estate terms can be even more confusing. To make a transaction smoother for the buyer or seller, they need to understand the basic real estate terms that they will be hearing. The following are basic real estate terms that are pertinent to most transactions.

Appraisal: A written value of a property. This is concluded by a licensed appraiser, and based on what other houses have sold for in the neighborhood or surrounding areas recently. The appraised value justifies what the buyer is paying, and also is used by the lender to determine the amount of money they can lend to the buyer.

Broker: This term can have different meanings. In North Carolina all real estate agents are required to be Brokers. In the mortgage industry this is referred to a loan officer or the company that doesn't lend money, "brokers" them out to lenders or investors.

Clear title: A title that has a proven ownership with no liens against it.

Closing: In North Carolina a real estate transaction is "closed" when all documents are signed by the buyer and seller, the deed has been recorded, and money has changed hands.

Closing Costs: Costs that are acquired by the buyer and the seller so that the property can by exchanged. For example, attorney's fees, taxes, insurance, lender's fees, real estate commissions, etc.

Commissions: When a Real Estate Broker is involved in a transaction, the compensation given to them is called commissions. The commissions in North Carolina are paid by the Seller as part of their closing costs.

Contingency: A condition that must be met before the contract can be enforced. For example, a Buyer could write an offer "contingent" upon their existing home selling.

Contract: In Real Estate, this is when both the buyer and seller have agreed upon terms that are in writing. These terms are the contract.

Deed: The legal document that conveys ownership of a property.

Down Payment: An amount paid by the Buyer in cash which is not financed with a mortgage.

Earnest Money Deposit: A deposit that the Buyer submits with his offer to show that that he or she is serious. In North Carolina, this money is usually held by the Real Estate Broker in an escrow account, and is credited towards the price of the home at closing.

Easement: A legal right of way that gives a person other than the owner access to the property. For example, one owner may have an easement allowing their driveway to be on another's property.

Encroachment: An improvement that illegally intrudes on another's property. For example a storage shed may be partially "encroaching" on the neighbor's property, if part of the shed has crossed over the owner's property line and is partially on the neighbor's lot.

Exclusive Listing: A written contract that gives a Real Estate Broker the right exclusive right to sell a property. This contract specifies terms such as commissions to be paid, and length of time the Broker has the listing.

Fixture: Personal property that becomes part of the property when attached in a permanent manner like built in appliances or ceiling fans.

Home Inspection: A complete inspection by a licensed professional that examines the structural and mechanical conditions of the property.

Homeowner's Association: An association that manages the common areas of a neighborhood. This Association collects dues and enforces agreed upon rules on the community.

Homeowner's insurance: The insurance policy that a homeowner has to protect the home and its contents.

Homeowner's Warranty: A Warranty that is purchased to cover repairs of certain items such as plumbing or appliances. Often the Seller will purchase this for the new Buyer to make the deal more inviting.

HUD-1 Settlement Statement: This is commonly referred to as the HUD or closing statement and it is the document that itemizes all funds paid by the buyer and the seller in the transfer of the property.

Realtor: A real estate broker who has an active membership with the National Association of Realtors.

Survey: A drawing that shows the exact property lines. This map will also show things such as easements and encroachments.

Title: The legal document that proves ownership of a property.

Title Search: An extensive check to ensure that the Seller is the legal owner of the property and that there are no liens prohibiting the sale of the property.